Purchase Order Financing: Growth Igniter

Sometimes all it takes to really help establish your small business is to get those first couple large orders from a customer, so that you can start building business credibility and customer loyalty. But what if you don’t have the resources to fulfill that large order? It would be a shame to miss out on such a big opportunity when it comes along, so you should consider taking advantage of an alternative financing method called purchase order financing. Ordinary financial transactions usually cannot be carried out quickly enough to act on a customer purchase order in time, so a more flexible and expedient method is called for.

What is purchase order financing?

Purchase order financing is often used today as an alternative to traditional bank financing when capital needs to be raised quickly for the purpose of fulfilling large customer orders. This commonly happens to startup companies and small businesses who simply lack the resources to purchase all the materials necessary to build and fulfill a large customer order.

In this case, an alternative lender will finance the purchase of materials from your supplier, so the necessary goods can be manufactured and shipped to your customer. In effect, the purchase order from your customer serves as collateral in the transaction, and provides a measure of surety to the alternative lender that he will receive payment from the customer, when an order has been fulfilled. Once the customer pays for the goods, the lender who provided purchase order financing is paid, and your small business is also paid after appropriate fees are deducted for the financing service. 

Who provides purchase order financing?

As long as your small business has customers that have a good history of paying off invoices for goods promptly, it should not be difficult for your company to find an alternative lender who will provide purchase order financing for you. Even better, it’s not strictly necessary that your small business has stellar credit, because these transactions are really based on the credit-worthiness of your customers and their payment habits. Call your local area alternative lender today, and see if purchase order financing will work for you, to give your small business the big boost it needs to really get established.


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